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Westpac Economist Matthew Bunny says there is a “wave of money” ready to be “unleashed” as households accrue savings during the pandemic.
“We know the RBA has underscored it is a big uncertainty what will happen with household spending,” he told Sky News Australia.
“Households have built up large saving buffers.
“It might sound surprising that would happen in a pandemic, but when people can’t spend money and the income is still coming in, it means their bank balances are going up, maybe they’ve opted to pay down their mortgage or other debts.
“There is this wave of money which is sitting out there ready to get unleashed when we re-open – it’s going to be a matter of how quickly that money is unleashed as to how quickly we bounce back.”
Mr Bunny pointed out Australia would likely be re-opening with higher COVID-19 case numbers than in the past and could lead consumers to a “tentative” approach to returning to shops and restaurants.
“We also know businesses are feeling the pinch from another round of lengthy lockdowns, particularly those in sectors that are vulnerable like hospitality and tourism,” he said.
“Government support this time around has been more targeted, so that could mean the bounce back is softer than what we saw previously.
“Encouragingly, business and consumer confidence has held up quite well relative to what we saw in the national lockdown last year and the Victorian lockdown in late 2020.”